Question 1

The total tariff revenue to the government of an imported good is found by adding the tariff to the quantity of the good imported.

Accepted Answer

A) True 
 B)False

Question 2

The effect of an import quota on the domestic market is to shift the:

Accepted Answer

A)  demand curve to the right by the amount of the quota. 
B)  demand curve to the left by the amount of the quota. 
C)  supply curve to the right by the amount of the quota. 
D)  supply curve to the left by the amount of the quota. 
E)  consumers' marginal utility curves if they prefer foreign goods to domestic goods. 
A)  demand curve to the right by the amount of the quota. 
B)  demand curve to the left by the amount of the quota. 
C)  supply curve to the right by the amount of the quota. 
D)  supply curve to the left by the amount of the quota. 
E)  consumers' marginal utility curves if they prefer foreign goods to domestic goods.

Question 3

Suppose the production of helicopters is an industry characterized by increasing returns to scale and an Argentine firm, Cicare, is the only player in this market. The firm caters to the global market and earns a profit of $10 million. Flettner, a German firm has been considering entering this market for a while, but it is aware that its entry will cause each firm to lose about $4 million. Although a government subsidy allows Flettner to enter the helicopter market, the company is unable to reap profits in the long run. Which of the following could have led to this outcome?

Accepted Answer

A)  Flettner experienced high production costs due to inadequate supply of inputs. 
B)  New firms had entered the helicopter industry. 
C)  The German government ran a balance of payment deficit. 
D)  The Argentine government retaliated by subsidizing Cicare. 
E)  There was very low investment in research and development in this industry. 
A)  Flettner experienced high production costs due to inadequate supply of inputs. 
B)  New firms had entered the helicopter industry. 
C)  The German government ran a balance of payment deficit. 
D)  The Argentine government retaliated by subsidizing Cicare. 
E)  There was very low investment in research and development in this industry.

Question 4

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country.
Figure 20.2
  
-Refer to Figure 20.2. In the absence of international trade, what are the domestic equilibrium price and quantity?

Accepted Answer

A)  $30 and 200 bushels 
B)  $50 and 400 bushels 
C)  $30 and 400 bushels 
D)  $50 and 300 bushels 
E)  $25 and 150 bushels 
A)  $30 and 200 bushels 
B)  $50 and 400 bushels 
C)  $30 and 400 bushels 
D)  $50 and 300 bushels 
E)  $25 and 150 bushels

Question 5

In order to protect key industries, some countries impose taxes on their exports instead of imports, mainly because it is easier to collect taxes from the export industry.

Accepted Answer

A) True 
 B)False

Question 6

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.
Figure 20.4
  
-Refer to Figure 20.4. If cocoa sells for $6 per pound in the world market, determine the volume of U.S. cocoa imports.

Accepted Answer

A)  250 pounds 
B)  350 pounds 
C)  300 pounds 
D)  150 pounds 
E)  200 pounds 
A)  250 pounds 
B)  350 pounds 
C)  300 pounds 
D)  150 pounds 
E)  200 pounds

Question 7

Domestic firms often claim that foreign firms have an unfair advantage because foreign workers are willing to work for very low wages.

Accepted Answer

A) True 
 B)False

Question 8

The figure below shows the demand (D) and supply (S) curves of a good produced domestically in an economy as well as traded in the international market.
Figure 20.1
   In the figure,
PS1U1B11S1U1B0: Price of the good in the international market.
PS1U1B12S1U1B0: Price of the good in the domestic market after the imposition of tariff by the government.
PS1U1B13S1U1B0: No-trade price of the good in the domestic market.
-According to Figure 20.1, if the international price of the good is P1, which of the following statements is true?

Accepted Answer

A)  The domestic market is in equilibrium. 
B)  There is an excess supply in the domestic market by the amount Q4 - Q2. 
C)  The country will export Q3 - Q1 units of the good. 
D)  There is an excess demand of Q4 - Q2 units in the domestic market. 
E)  The country needs to import Q5 - Q1 units of the good to satisfy domestic demand. 
A)  The domestic market is in equilibrium. 
B)  There is an excess supply in the domestic market by the amount Q4 - Q2. 
C)  The country will export Q3 - Q1 units of the good. 
D)  There is an excess demand of Q4 - Q2 units in the domestic market. 
E)  The country needs to import Q5 - Q1 units of the good to satisfy domestic demand.

Question 9

If the average costs of production decline with increases in output, then the larger a firm is, the lower its per unit costs will be.

Accepted Answer

A) True 
 B)False

Question 10

One danger associated with calls for fairness based on reciprocity is that, calls for fair trade may be invoked in cases where, foreign restrictions on U.S. imports do not actually exist.

Accepted Answer

A) True 
 B)False

Question 11

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.
Figure 20.4
  
-Refer to Figure 20.4. Assume that Ghana is the only cocoa exporter supplying cocoa in the world market at $6 per pound. If the U.S. enters into a free trade agreement (FTA) with Ghana, what would be its total cocoa imports?

Accepted Answer

A)  100 pounds 
B)  300 pounds 
C)  200 pounds 
D)  150 pounds 
E)  250 pounds 
A)  100 pounds 
B)  300 pounds 
C)  200 pounds 
D)  150 pounds 
E)  250 pounds

Question 12

The European Economic Community was created in 1957 by:

Accepted Answer

A)  France, the United Kingdom, Italy, Belgium, the Netherlands, and Luxembourg. 
B)  France, West Germany, Italy, Belgium, the Netherlands, and Luxemburg. 
C)  France, West Germany, Italy, Belgium, the Netherlands, and the United Kingdom. 
D)  France, West Germany, Italy, the United Kingdom, Belgium, the Netherlands, and Luxembourg. 
E)  France, West Germany, Italy, Belgium, the United Kingdom, and Luxembourg. 
A)  France, the United Kingdom, Italy, Belgium, the Netherlands, and Luxembourg. 
B)  France, West Germany, Italy, Belgium, the Netherlands, and Luxemburg. 
C)  France, West Germany, Italy, Belgium, the Netherlands, and the United Kingdom. 
D)  France, West Germany, Italy, the United Kingdom, Belgium, the Netherlands, and Luxembourg. 
E)  France, West Germany, Italy, Belgium, the United Kingdom, and Luxembourg.

Question 13

Every country imposes tariffs on at least some imports.

Accepted Answer

A) True 
 B)False

Question 14

The figure below shows the demand (D) and supply (S) curves of a good produced domestically in an economy as well as traded in the international market.
Figure 20.1
   In the figure,
PS1U1B11S1U1B0: Price of the good in the international market.
PS1U1B12S1U1B0: Price of the good in the domestic market after the imposition of tariff by the government.
PS1U1B13S1U1B0: No-trade price of the good in the domestic market.
-Refer to Figure 20.1. If the government imposes a tariff such that the price of the good in the domestic market is P2 while the international price is P1, the dollar value of the tariff is equal to:

Accepted Answer

A)  P3 - P1. 
B)  P2 - P3. 
C)  P2 - P1. 
D)  P1 - P2. 
E)  P1 - P3. 
A)  P3 - P1. 
B)  P2 - P3. 
C)  P2 - P1. 
D)  P1 - P2. 
E)  P1 - P3.

Question 15

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country.
Figure 20.2
  
-According to Figure 20.2, if the world price of wheat is $25 and a tariff of $25 is imposed by the domestic government, the total tariff revenue collected by the government is:

Accepted Answer

A)  $2,000. 
B)  $0. 
C)  $200. 
D)  $100. 
E)  $4,000 
A)  $2,000. 
B)  $0. 
C)  $200. 
D)  $100. 
E)  $4,000

Question 16

Preferential trade agreements have a beneficial trade-diversion effect when they reduce prices for traded goods and stimulate the volume of international trade.

Accepted Answer

A) True 
 B)False

Question 17

Protection from foreign competition benefits domestic producers in the protected industry at the expense of domestic consumers.

Accepted Answer

A) True 
 B)False

Question 18

When barriers to trade are imposed, we should expect some groups to be harmed at the expense of other groups.

Accepted Answer

A) True 
 B)False

Question 19

Proponents of strategic trade policy contend that:

Accepted Answer

A)  government should tax domestic firms to generate greater revenues. 
B)  government should encourage imports to prevent monopoly in the domestic market. 
C)  government should provide subsidies to domestic firms with decreasing costs. 
D)  government should discourage domestic firms with decreasing costs from continuing production. 
E)  government should tax domestic import competing firms. 
A)  government should tax domestic firms to generate greater revenues. 
B)  government should encourage imports to prevent monopoly in the domestic market. 
C)  government should provide subsidies to domestic firms with decreasing costs. 
D)  government should discourage domestic firms with decreasing costs from continuing production. 
E)  government should tax domestic import competing firms.

Question 20

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.
Figure 20.4
  
-From Figure 20.4, determine the total volume of U.S. cocoa imports if its government imposes tariff at the rate of $2 per pound on cocoa.

Accepted Answer

A)  200 pounds 
B)  250 pounds 
C)  100 pounds 
D)  300 pounds 
E)  350 pounds 
A)  200 pounds 
B)  250 pounds 
C)  100 pounds 
D)  300 pounds 
E)  350 pounds

The total tariff revenue to the government of an imported good is found by adding the tariff to the quantity of the good imported.

The effect of an import quota on the domestic market is to shift the:

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 20.2 -Refer to Figure 20.2. In the absence of international trade, what are the domestic equilibrium price and quantity?

In order to protect key industries, some countries impose taxes on their exports instead of imports, mainly because it is easier to collect taxes from the export industry.

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S. Figure 20.4 -Refer to Figure 20.4. If cocoa sells for $6 per pound in the world market, determine the volume of U.S. cocoa imports.

Domestic firms often claim that foreign firms have an unfair advantage because foreign workers are willing to work for very low wages.

If the average costs of production decline with increases in output, then the larger a firm is, the lower its per unit costs will be.

One danger associated with calls for fairness based on reciprocity is that, calls for fair trade may be invoked in cases where, foreign restrictions on U.S. imports do not actually exist.

The European Economic Community was created in 1957 by:

Every country imposes tariffs on at least some imports.

Preferential trade agreements have a beneficial trade-diversion effect when they reduce prices for traded goods and stimulate the volume of international trade.

Protection from foreign competition benefits domestic producers in the protected industry at the expense of domestic consumers.

When barriers to trade are imposed, we should expect some groups to be harmed at the expense of other groups.

Proponents of strategic trade policy contend that:

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S. Figure 20.4 -From Figure 20.4, determine the total volume of U.S. cocoa imports if its government imposes tariff at the rate of $2 per pound on cocoa.

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

Filters

Exam 20: International Trade Restrictions

The total tariff revenue to the government of an imported good is found by adding the tariff to the quantity of the good imported.

The effect of an import quota on the domestic market is to shift the:

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 20.2 -Refer to Figure 20.2. In the absence of international trade, what are the domestic equilibrium price and quantity?

In order to protect key industries, some countries impose taxes on their exports instead of imports, mainly because it is easier to collect taxes from the export industry.

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S. Figure 20.4 -Refer to Figure 20.4. If cocoa sells for $6 per pound in the world market, determine the volume of U.S. cocoa imports.

Domestic firms often claim that foreign firms have an unfair advantage because foreign workers are willing to work for very low wages.

If the average costs of production decline with increases in output, then the larger a firm is, the lower its per unit costs will be.

One danger associated with calls for fairness based on reciprocity is that, calls for fair trade may be invoked in cases where, foreign restrictions on U.S. imports do not actually exist.

The European Economic Community was created in 1957 by:

Every country imposes tariffs on at least some imports.

Preferential trade agreements have a beneficial trade-diversion effect when they reduce prices for traded goods and stimulate the volume of international trade.

Protection from foreign competition benefits domestic producers in the protected industry at the expense of domestic consumers.

When barriers to trade are imposed, we should expect some groups to be harmed at the expense of other groups.

Proponents of strategic trade policy contend that:

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S. Figure 20.4 -From Figure 20.4, determine the total volume of U.S. cocoa imports if its government imposes tariff at the rate of $2 per pound on cocoa.

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

Filters